Nutanix: Fiscal 3Q19 Financial Results
For first time pause in growth for HCI star
This is a Press Release edited by StorageNewsletter.com on June 3, 2019 at 2:22 pm| (in $ million) | 3Q18 | 3Q19 | 9 mo. 18 | 9 mo. 19 |
| Revenue | 289.4 | 287.6 | 851.7 | 936.3 |
| Growth | -0% | 10% | ||
| Net income (loss) | (85.7) | (209.8) | (209.8) | (426.8) |
Nutanix, Inc. announced financial results for its third quarter of fiscal 2019, ended April 30, 2019.
3FQ19 Financial Highlights
• Revenue: $287.6 million (at 77.1% non-GAAP gross margin), down from $289.4 million (at 68.4% non-GAAP gross margin) in 3FQ18
• Billings: $346.0 million, down from $351.2 million in 3FQ18
• Software and Support Revenue: $265.8 million, up 17% year-over-year from $226.8 million in 3FQ18
• Software and Support Billings: $324.2 million, up 11% year-over-year from $292.0 million in 3FQ18
• Gross Margin: GAAP gross margin of 73.9%, up from 67.0% in the third quarter of fiscal 2018; Non-GAAP gross margin of 77.1%, up from 68.4% in 3FQ18
• Net Loss: GAAP net loss of $209.8 million, compared to a GAAP net loss of $85.7 million in 3FQ18; Non-GAAP net loss of $103.0 million, compared to a non-GAAP net loss of $34.6 million in 3FQ18
• Net Loss Per Share: GAAP net loss per share of $1.15, compared to a GAAP net loss per share of $0.51 in 3FQ18; Non-GAAP net loss per share of $0.56, compared to a non-GAAP net loss per share of $0.21 in 3FQ18
• Cash and Short-term Investments: $940.8 million, up from $923.5 million in 3FQ18
• Deferred Revenue: $838.3 million, up 55% from 3FQ18
• Operating Cash Flow: Use of $36.5 million, compared to generation of $13.3 million in 3FQ18
• Free Cash Flow: Use of $58.9 million, compared to use of $0.8 million in 3FQ18
“While we faced a top-line impact in our third quarter as we continue to execute our strategic shift toward a recurring revenue business model, our strong foundation and commitment to our customers position us well for the long term,” said Dheeraj Pandey, chairman, founder and CEO. “Successful businesses are built over time on a bedrock of exceptional products, outstanding customer support and talented and committed employees. With solid sales hiring in 3Q and increased adoption of our AHV hypervisor, indicating a strong product and enthusiastic customers, I truly believe Nutanix has that foundation in place.“
“We are encouraged by the momentum and growth of our subscription business as we transform to a recurring revenue model, which will enable a more predictable revenue stream over time and provide our customers greater flexibility for their hybrid cloud deployments,” said Duston Williams, CFO. “We believe the actions we have been taking to strengthen lead generation and enhance sales execution will position us well for the future.”
Recent company Highlights
• Accelerated Shift to Subscription Recurring Revenue Model: 3FQ19 subscription billings increased to 65% of total billings, up 8% percentage points from the previous quarter, and 3FQ19 subscription revenue reached $168.4 million, representing a year-over-year increase of 110%. the firm signed a deal worth nearly $6 million with a new customer, which is one of the global Big Four accounting firms. This deal represents the largest subscription deal in company history with a new customer.
• Expanded Customer Base: It ended 3FQ19 with 13,190 end-customers. Third quarter customer wins included Cyxtera Technologies, Lessor Group, Los Angeles County Museum of Art, Meredith Corporation, Tokyo Stock Exchange, Inc., Unum Group, Whole Foods Market.
• Signed Global Agreement with HPE: The company entered an agreement with HPE to deliver hybrid cloud as-a-service fueled by AHV hypervisor and an integrated appliance running Nutanix Enterprise Cloud OS software on HPE servers to the market. These two joint solutions are expected to be available in 3CQ19.
• Hosted Eighth .NEXT User Conference in Anaheim, CA: Nearly 6,000 attendees, including customers, prospects and partners, joined the firm in Anaheim, CA, for the eighth annual conference where attendees heard from customers about transforming their business with the Nutanix Enterprise Cloud Platform. The venue was also the location for the 3rd and largest Partner Xchange to date, with 1,600 Nutanix channel attendees.
• Announced Nutanix Mine: The company announced a new open solution that integrates secondary storage operations with its Enterprise Cloud Platform, allowing customers to manage their primary and secondary storage operations from within the same management plane. Working with backup providers like Veeam, HYCU, Commvault, Veritas and Unitrends, Mine will eliminate the complexity of managing a separate silo for backup operations while preserving the ability for customers to use the backup solution to fit their business operations.
• Announced Nutanix Xi Frame on AHV: The firm introduced the extension of its desktop-as-a-service offering to Nutanix-powered private clouds, expanding its availability beyond the public clouds of AWS and Azure. With support for AHV, IT teams can now select the right cloud, public or private, for their VDI initiatives.
• Introduced Nutanix Xi Clusters: It announced a hybrid cloud offering that provides hybridity and elasticity by delivering the complete HCI stack directly on AWS EC2 bare metal instances. Xi Clusters running in AWS can be managed by Prism deployed on-premises or on Xi Clusters in AWS.
• Announced Global Availability of Nutanix Enterprise Cloud OS Software on Fujitsu: Both companies announced the availability of Enterprise OS software on Fujitsu’s PRIMERGY servers. With this announcement, it brings greater choice of hardware platforms to customers in Japan and around the world, and demonstrates the power of its Enterprise OS software capabilities.
• Launched The Forecast by Nutanix: It introduced a new site focused on delivering news articles with insights, interviews and tech trends for its customers, partners, prospects and enterprise cloud industry at large.
• Added Experienced Cloud Executive to board of directors: Brian Stevens, who recently served as VP and CTO of Google Cloud, is joining the board of directors effective June 1, 2019. He also served as EVP and CTO of Red Hat during his 13-year tenure at the company.
For 4FQ19, Nutanix expects:
• Revenue between $280 million and $310 million;
• Billings between $350 million and $380 million;
• Non-GAAP gross margin of approximately 77%;
• Non-GAAP operating expenses between $340 million and $350 million; and
• Non-GAAP net loss per share of approximately $0.65, using approximately 187 million weighted shares outstanding
Comments
As the more than one billion dollar company since last year approaches its 10th anniversary, sales, missing estimates, decreased Q/Q, by 14% for the first time, and it continues not to be profitable with huge $210 million net loss for the quarter, a figure increasing regularly.
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Is it the end of the success story of Nutanix in HCI, one of the most growing storage market? Not exactly, but it's clear that there is a pause explained by transition to subscription. For next quarter, the firm expects revenue between $280 million and $310 million, a small quarterly increase, between -3% and 8%. But it will end fiscal year at around $1.3 million up from $1.2 billion in FY18.
In the future, the company will bet on its global agreement with HPE with joint solutions expected to be available in 3CQ19 and the Availability of Nutanix Enterprise Cloud OS Software on Fujitsu hardware.
Software and support revenue was $266 million for the period, up 17% from a year ago quarter and down 11% from the prior quarter. Total billings were $346 million in the quarter, representing a 1% decrease from the year ago quarter and down 16% from the former three-month period. The billings were also impacted by the lower than expected hardware shipments and the lower upfront value received from the new term based licenses.
Software and support billings were $324 million, up 11% Y/ and down 14% Q/Q.
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On the positive side, during the most recent quarter, Nutanix:
. Delivers growth in subscription revenue as it accelerates business model transition
. Increases billings from subscriptions to 65% of total billings, up from 57% in 2FQ19 41% in 3FQ18
. Grows deals that include offerings beyond core HCI to 23%
In 3FQ19, new term based subscription bookings were $90 million, up from $57 million from the former quarter. Approximately 55% came from existing customers who had previously purchased non-portable licenses.
In 3FQ19, the firm saw over 600 customers purchase new term based licenses and now ends with 13,190 end-customers.
New customer bookings represented 25% of total bookings in the quarter, down from 29% in 3FQ18.
Software and support bookings from international regions were 45% of total software and support bookings, the same as 3FQ18.
During the quarter, Nutanix continued to see momentum in large deals, closing 50 worth more than $1 million, including 8 worth more than $3 million. It has now have 18 customers with a lifetime spend of more than $15 million and nearly 850 customers with a lifetime spend of more than $1 million.
During the most recent quarter, Nutanix signed especially a deal worth nearly $6 million with a new customer, which is one of the global Big Four accounting firms. This deal represents the largest subscription deal in company history with a new customer.
Te firm saw increasing adoption of AHV hypervisor to 42% this quarter on a rolling four quarter basis and continued growth for its new solutions outside its core HCI platform with 23% of deals including Essentials and Enterprise offerings.
Nutanix closes the quarter with cash and short-term investments of $941 million, down $25 million from the former one.
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